Toys R Us says millennials not having kids hurt the company — and it could be because of a looming 'demographic time bomb'

Children shopping with their parents at Toys R Us in 2003 in New York City. Getty Images

Toys R Us will close or sell each of its more than 700 locations in the US.

In the company's most recent annual filing, it cited declining birth rates as a threat to sales. Births have decreased rapidly since 2008 in the US, especially among millennial women.

Toys R Us was one of the last national toy chains, and more retailers could be in trouble.

Millennials are not like their parents.

Typically defined as those born from 1981 to 1996, millennials are more racially diverse and more college-educated and marry later than previous generations. Millennial women are also increasingly delaying parenthood or forgoing it altogether, as reflected by the US's declining fertility rate. Fertility hit a record low in 2016, bringing the rate among women ages 15 to 44 to 62 births per 1,000 women.

Many economists are wringing their hands about what this means for the US economy, since economic growth is harder when people don't have children.

Some say the US is at risk of becoming "a demographic time bomb," with fertility rates falling at a time when longevity is increasing. Japan — where 2017 marked a 118-year low for fertility at the same time people were living longer than ever before — is regarded as the poster child for this phenomenon.

Retailers, particularly ones that target newborns and children, are taking notice. The most recent example is Toys R Us, which wrote in its 2017 annual filing that the declining US birth rate could be hurting sales.

"Most of our end-customers are newborns and children and, as a result, our revenues are dependent on the birth rates in countries where we operate," the filing said. "In recent years, many countries' birth rates have dropped or stagnated as their population ages, and education and income levels increase. A continued and significant decline in the number of newborns and children in these countries could have a material adverse effect on our operating results."

The national toy chain announced last week that it would shutter or sell each of its 735 US stores. The country's declining birth rate is not the sole reason for Toys R Us' bankruptcy. The company also cited growing competition from online retailers, some $4.8 billion worth of debt, the rising popularity of online games, and an increase in labor costs as factors that may damage its business.

But the company's worries surrounding a shortage of young customers may highlight a new, troubling reality for similar companies, from big brands like Build-A-Bear Workshop to independent toy shops. Last year, New York magazine profiled several local toy stores, where "everything was on super-sale" as most struggled with sales.

The opening of a new Toys R Us in 1990. Getty Images The US saw a "boom" in birth rates in the two decades following World War II, which led to more potential customers for retailers that catered to children. Toys R Us launched its first store in Washington, DC, in 1957, when the baby boomer generation was young.

Baby boomers are the largest generation in US history, but Pew researchers project millennials will surpass them in 2019.

Toys R Us' decline in sales began in the early 1990s, when the US began to see a steady drop in births. The US birth date started to fall more rapidly after 2007 amid the Great Recession. Toys R Us was one of the last national chains that focused on toys, with its decline perhaps signaling the end of an era.